As filed with the Securities and Exchange Commission on January 2, 2001
Registration No. 333-37046
-----------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------------------
FORM SB-2
Amendment No. 3
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
---------------------------------------
AVIC TECHNOLOGIES LTD.
(Name of issuer in its charter)
<TABLE>
<S> <C> <C>
Delaware ??? 98-0212726
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or organization) Classification Code) Identification Number)
445 St-Francis Xavier St. Irving Rothstein, Esq.
Montreal, Quebec H2Y 2T1 Heller, Horowitz & Feit, P.C.
Canada 292 Madison Avenue
(514) 844-3510 New York, New York 10017
(Address and telephone number (212) 685-7600
of registrant's principal executive (Name, address and telephone
offices and principal place of business) number of agent for service)
</TABLE>
------------------------------------
Copies to:
Irving Rothstein, Esq.
Heller, Horowitz & Feit, P.C.
292 Madison Avenue
New York, New York 10017
Telephone: (212) 685-7600
Approximate date of commencement of proposed sale to public: At the discretion
of the selling stockholders.
If any of the securities being registered on this form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933 check the following box. [X]
<TABLE>
<S> <C> <C> <C> <C>
CALCULATION OF REGISTRATION FEE
----------------------------------- ------------------ ------------------------ -------------------------- -------------------
Title of Each Class of Securities Amount To Be Proposed Maximum Proposed Maximum Amount of
to be Registered Registered Offering Price Per Aggregate Offering Registration Fee
Security(1) Price(1)
----------------------------------- ------------------ ------------------------ -------------------------- -------------------
----------------------------------- ------------------ ------------------------ -------------------------- -------------------
Common Stock, par value $0.0001 7,411,000 $0.10(2) $741,100 $195.65
----------------------------------- ------------------ ------------------------ -------------------------- -------------------
----------------------------------- ------------------ ------------------------ -------------------------- -------------------
Total 7,411,000 $741,100 $195.65
----------------------------------- ------------------ ------------------------ -------------------------- -------------------
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee.
(2) Based upon the price of the most recent private offering.
<PAGE>
The registrant hereby amends the registration statement on such date or
dates as may be necessary to delay its effective date until the registrant shall
file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
2
<PAGE>
SUBJECT TO COMPLETION DATED, JANUARY 2, 2001
-----------------
AVIC TECHNOLOGIES LTD.
----------------------
7,411,000 Shares of Common Stock
This Prospectus covers 7,411,000 shares of the common stock, par
value $.0001 per share, of Avic Technologies Ltd. The common stock will be sold
solely by the selling stockholders.
The securities offered hereby involve a high degree of risk.
Please read the "Risk factors" beginning on page 3.
There is presently no public market for our securities.
--------------------------------
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these securities or
determined if this Prospectus is truthful or complete. Any representation to the
contrary is a criminal offense.
The date of the Prospectus is ________, 2001.
<PAGE>
Summary
Avic is a Delaware corporation established in March 1999 to
capitalize on the rapidly growing building industry in China and other parts of
Asia. We intend to profit from this growth by offering our technical expertise
in this industry as consultants to small and medium building contractors, and by
establishing joint ventures in the production and marketing of fiberglass window
frames. Our principal executive offices are located at 445 St-Francis Xavier
St., Montreal, Quebec H4X 2C9. Our telephone number is (514) 844-3510.
Common stock offered for sale Up to 7,411,000 shares
solely by selling stockholders
Price At the market
Number of shares outstanding 12,221,000 shares
Use of proceeds Avic will not receive any proceeds from the
sale of the shares of common stock by the
selling stockholders.
Plan of distribution The sale of the shares of common stock by
the selling stockholders may be effected
by them from time to time in the over the
counter market or in such other public
forum where our shares are publicly traded
or listed for quotation.
<PAGE>
Risk factors
We have been recently organized, have had losses since inception and expect to
have losses for the foreseeable future.
From our inception in March 1999 through September 30, 2000, we
incurred a net loss of $319,207. We anticipate continuing to incur significant
losses until, at the earliest, we generate sufficient revenues to offset the
substantial up-front expenditures and operating costs associated with developing
and commercializing products utilizing our technology. There can be no assurance
that we will ever operate profitably.
In their report on our audited financial statements, our
auditors have stated that there is a substantial doubt as to whether we will be
able to remain in business for even the next twelve months. Their concerns are
based upon our losses and that we have no specific plan to have the funds
necessary to implement our business plan. If their concerns are proven accurate,
any investment in our securities will likely be lost.
We do not have any products currently for sale nor any contracts with customers
and there can be no assurance that we ever will
We have not entered into any agreements to sell our products
to any customers, as yet. We do not believe that we will generate significant
revenues in the immediate future. We will not generate any meaningful revenues
unless we obtain contracts with a significant number of building contractors or
building components suppliers. There can be no assurance that we will ever be
able to obtain contracts with a significant number of customers to generate
meaningful revenues or achieve profitable operations.
We have only limited experience in developing and
commercializing new products based on innovative technologies, and there is
limited information available concerning the potential performance or market
acceptance of our proposed products. There can be no assurance that
unanticipated expenses, problems or technical difficulties will not occur which
would result in material delays in commercialization of our products or that our
efforts will result in successful commercialization.
We anticipate needing additional financing in the amount of $1,000,000 during
the next 12 months to implement our business plan and such financing may be
unavailable or too costly
Our capital requirements relating to the marketing of our
product have been, and will continue to be, significant. We are dependent on the
proceeds of future financing in order to continue in business and to develop and
commercialize additional proposed products. We anticipate requiring at least
$1,000,000.00 in additional financing. There can be no assurance that we will be
3
<PAGE>
able to raise the substantial additional capital resources necessary to permit
us to pursue our business plan. We have no current arrangements, or sources of,
additional financing and there can be no assurance that any such financing will
be available to us on commercially reasonable terms, or at all. Any inability to
obtain additional financing will have a material adverse effect on us, such as
requiring us to significantly curtail or cease operations.
Our business plan is to sell our products in China and there are unique
financial and political risks with doing business in China
We intend to conduct operations in China. China does not
currently have a democratic, western style, free market economy. While China has
taken steps to turn parts of its economy on more capitalistic basis to attract
business and investment, the development of political and economic systems are
relatively new and not necessarily stable. In addition, the lack of convertible
currency substantially increases the risk to the investor. Further, China does
not have a comprehensive legal system and the interpretation and enforcement of
a commercial agreement may be problematic.
Our business plan involves a new concept for China and it is uncertain if the
market will embrace our services
Our business plan introduces a novel concept to the Chinese
marketplace in that we will not only offer products for sale, but also supply
design consulting services to the construction companies or contractors. This
approach is, to the best of our knowledge, not yet available to the construction
industry in China. If we are able, as well, to enter into satisfactory marketing
and distribution arrangements in the future, our success will be largely
dependent on the successful acceptance of this multi-service approach. There can
be no assurance that our strategy will result in successful product
commercialization or that our efforts will result in initial or continued market
acceptance for our proposed services.
In addition, our products were developed outside of China, and
may have to be modified to adapt to the Chinese construction industry. This may
require us to commit considerable time, effort and resources to finalize such
development and adapt our products to satisfy the local codes and standards of
the Chinese regulatory authorities. No assurance can be given that we will be
able to successfully modify our products and in the event we cannot, our
business will be adversely effected.
Special note regarding forward-looking statements
Some of the statements under "Risk factors," Plan of
operations," "Business" and elsewhere in this prospectus are forward-looking
statements that involve risks and uncertainties. These forward-looking
statements include statements about our plans, objectives, expectations,
intentions and assumptions and other statements contained in this prospectus
that are not statements of historical fact. You can identify these statements by
words such as "may," "will," "should," "estimates," "plans," "expects,"
"believes," "intends" and similar expressions. We cannot guarantee future
4
<PAGE>
results, levels of activity, performance or achievements. Our actual results and
the timing of certain events may differ significantly from the results discussed
in the forward-looking statements. Factors that might cause such a discrepancy
include those discussed in "Risk Factors" and elsewhere in this prospectus. You
are cautioned not to place undue reliance on any forward-looking statements.
Summary historical financial information
The following selected financial data as of and for the periods ended
December 31, 1999 and September 30, 2000 is derived from our December 31, 1999
audited financial statements and our September 30, 2000 unaudited financial
statements included in this Prospectus.
The following data should be read in conjunction with our
financial statements.
Statement of operations data
<TABLE>
<S> <C> <C>
------------------------------------ --------------------------------------- -----------------------------------------
From 3/4/99 For the nine months
(inception) to 12/31/99 Period ended 9/30/00
----------------------- (unaudited)
------------------------------------ --------------------------------------- -----------------------------------------
------------------------------------ --------------------------------------- -----------------------------------------
Net Revenues $ -0- $ 36,106
------------------------------------ --------------------------------------- -----------------------------------------
------------------------------------ --------------------------------------- -----------------------------------------
Operating Loss $ (192,331) $(126,876)
------------------------------------ --------------------------------------- -----------------------------------------
------------------------------------ --------------------------------------- -----------------------------------------
Income Taxes $ -0- $ -0-
------------------------------------ --------------------------------------- -----------------------------------------
------------------------------------ --------------------------------------- -----------------------------------------
Net Loss $ (192,331) $ (126,876)
------------------------------------ --------------------------------------- -----------------------------------------
------------------------------------ --------------------------------------- -----------------------------------------
Loss Per Share $ (.02) $ (.01)
(Basic and Diluted)
------------------------------------ --------------------------------------- -----------------------------------------
Balance sheet data
December 31, 1999 September 30, 2000
----------------- (unaudited)
---------------
Working Capital $ 122,400 $ 58,504
Total Assets $ 124,900 $ 125,790
Total Liabilities $ 2,500 $ 67,286
Stockholders' Equity $ 122,400 $ 58,504
</TABLE>
5
<PAGE>
Plan of operations
The following discussion should be read in conjunction with
the financial statements and related notes that are included elsewhere in this
prospectus.
Overview
We plan to derive revenues from two principal sources:
o Mostly from window frame manufacturing, sales, and
distribution, and
o Technical services, offering small and medium sized
contractors access to our expertise.
Technical services will usually include an initial one-time
setup fee and a consulting fee based on hourly or other time related billings.
Technical consulting services include product design and integration solutions
and related services provided by us. As described in greater detail below, we
have been hired by a Chinese government agency to provide specific consulting
services.
In the case of manufacturing and sales of fiberglass window
frame products, revenues from sales will be accrued upon delivery of goods. We
do not anticipate delivery of any manufactured products prior to the second
quarter 2001.
Our business plan is to develop our business in China in two
stages, both from a financial and operational viewpoint. Upon obtaining
requisite seed capital, the first stage in our plan is to set-up our operations
in China and Canada. This includes concluding agreements with manufacturing and
distribution networks in China; delivering consulting services to establish our
reputation for expertise in this area and provide some positive cash flow; and
the establishment of additional funding sources. The second stage, which is the
primary focus of our business, will be the actual selling and manufacturing of
fiberglass window frames in China.
During the first stage we are looking to solidify
relationships with potential joint venture partners that are required to carry
out our primary business. We are searching for partners having one or more of
the following capabilities; supplying capital, either directly to a joint
venture or to the parent company; having existing production facilities; having
a well-developed marketing and/or distribution organization in place; having
expertise or contacts in the construction or housing products industries and/or
having achieved important recognition in the business communities within their
respective Chinese territories.
To accomplish this, we are relying heavily on the personal
contacts in China that our co-founders have developed through their various
prior business ventures in China. Additionally, the ability to attract partners
6
<PAGE>
or customers is dependent on our co-founders knowledge of the building industry,
in general, and the fiberglass window industry, in particular. To further assist
us, we have engaged Mr. Alan Chan, as consultant to the Company, who has special
expertise in the evaluation and selection of equipment for this industry.
To make us more attractive to potential Chinese partners we
are attempting to differentiate ourselves from our competitors along the
following lines. By investing in researching and evaluating the current status
of the window frame market in China and becoming fully cognizant of the various
suppliers of manufacturing equipment, we have developed the capability to be a
sole source for the integration of most of the fiberglass window frame
equipment. By sole source, we mean to say that we can integrate a production
line with various sources of equipment and set this up to be one unified
functional production line. We believe that this approach will differentiate us
from the competition. To our knowledge, no manufacturer currently offers a
complete production line at a reasonable price.
Additionally, we will be promoting our high level of technical
expertise and marketing our capabilities to be a sole source supplier of
fiberglass window frame products and related services to small and medium
construction and design institutes, particularly those with limited technical
resources. We intend to make full to use of our local Chinese joint venture
partner's marketing and distribution channel to market our products. Also, since
we anticipate that our partner will be established in the construction or
housing products industries and will have achieved important recognition in the
business communities within their respective Chinese territories business, we
expect to take advantage of their local market business contacts and further
utilize any idle capacity within their existing production facilities.
From the commencement of our company in March 1999 until now, we first
concentrated on obtaining funding for the first phase of operations, which we
estimate will ultimately require approximately $400,000 to implement, including
funds spent to date. In a private placement during the second half of 1999, we
successfully sold 2,778,000 common shares, realizing $277,800, and additionally
have established a line of credit in the amount of $75,000 from the HongKong
Bank of Canada, for a total funding of $352,800. We expect to be able to raise
any small shortfall by increasing the line of credit, short term loans or
reducing overhead. We then established our presence in Montreal, Quebec, Canada,
by renting office space. We have also begun to establish our presence in
Beijing, China. This will allow us to further the implementation of the main
objective of stage one, which is, to find, negotiate and conclude agreements
with desirable joint venture partners.
During the past ten months, we have succeeded in identifying
and contacting many viable candidates and have received positive interest from
five companies expressing their desire to participate with us to varying degrees
of involvement.
7
<PAGE>
The estimated cost of one plant to sell and manufacture our
product, including plant, equipment and working capital is approximately
$800,000. We anticipate funding from the following sources:
o Equity investment funder (investment partner) $275,000
o Chinese joint venture partner $190,000
o Business loan from a Chinese bank $250,000
o Chinese local government job creation grant $ 10,000
o Canadian government technology & training grant $ 75,000
Potential investment partners are ABB China Ltd., the Chinese
subsidiary of an international conglomerate that is a global supplier of
equipment. ABB indicated that they will be interested to participate by giving
us use of some of their industrial automation equipment in our project and an
yet to be negotiated equity investment; Huacheng Navcom Corp. of Beijing, China,
a multi-million dollar company with numerous investments, including basic
materials, media, high tech and import/export trading. They are interested in
any new building material project with potential for good return; Topmost
Universal Corp. of Hong Kong, a company having many investments in the building
materials business in China. They see us as a pure investment in building
materials to complement their existing building material investments; S&C Proneq
Inc. of Delson, Quebec, Canada, a factory automation manufacturing company,
which has some investment in South America. Proneq is interested to invest in
small equity investment and to off the use of some of their systems in our
project; and Pronitec Investment Inc. of Brossard, Quebec, Canada, a private
investment company, strong in energy and infrastructure projects.
We have also received a term sheet offer of financing from
AlphaGen Acceptance Corp. of Montreal, Quebec, Canada, indicating their
commitment, subject to various conditions, to assist in funding at least one
plant in China.
No assurances can be given that discussions or negotiations
with any of the above will result in final agreements.
Most importantly, on the manufacturing side, on October 28,
1999, we entered into our first Letter of Intent to undertake a Joint Venture.
Our intended joint venture partner is ShenZhen Li Zheng Industrial Ltd., of Shen
Zhen, Guangdong, a medium size basic material manufacturing company with annual
revenue of about 180 million "Renminbi" the lawful currency of the People
Republic of China, or approximately US$22,000,000. Their main products include
cement, white cement, concrete products, ceramic, aluminum window and other
decorative materials. They are among the biggest construction material suppliers
in the local Shenzhen market.
8
<PAGE>
This joint venture is intended to establish, in partnership, a
manufacturing plant with two production lines to produce fiberglass windows and
doors. The products initially will be sold to the southern part of China and
later to overseas clients.
We commenced our first consulting project in May 2000 for the
China Planning Institute for Building Materials Industry of Beijing. We were
requested to provide our expertise and recommendations on local housing
integration problems, specifically with regard to fiberglass window frames as
building materials and housing components.
In July, 2000 we received a one-time fee of $12,750. We are
continuing to bill them for our services at an hourly charge of $42 per hour.
The estimated total revenue is expected to be between $50,000 and $60,000 over
the next six months. In addition, we have several on going discussions with
other design institutes and construction firms to provide this type of
consulting services.
We believe that this part of our business will begin to grow
at a faster rate once we have the joint venture plant product to show
contractors.
Milestones
Following is the expected time line for implementation of our business
plan:
o Finalize joint venture contract negotiations; obtain approvals and
funding and complete engineering design: up to 12 weeks
The final details of the joint venture are currently being negotiated
and the signing of a contract is expected to be completed by year end.
The funding to complete this task will come from the company's capital
on hand, and we estimate that it will cost an additional $12,000.
Upon the signing of joint venture agreement, the new entity will submit
the contract document to the relevant provincial foreign economic and
other government authorities for approvals. Discussions with all the
potential and interested funding entities for the approximately
$800,000 required will be finalized and commitment letters obtained.
It is expected that this activity will require approximately 4 weeks,
and we estimate that it will cost about $15,000. The funding for this
activity will come from the company's existing capital.
The engineering design will be initiated once the contract is signed.
It is expected that this function will take about 6 weeks, and we
estimate that it will cost approximately $25,000. The funding for this
function will come from the company's existing capital.
9
<PAGE>
o Procurement and site development: Weeks 10 to 22
The procurement will be initiated once the equipment specifications are
completed, sometime during the engineering design period. The
procurement should take less than 12 weeks, especially if we decide to
purchase the pultruding machine from a domestic supplier. All other
equipment will also be purchased within this 12 week period. The
equipment for two production lines plant is estimated to cost
approximately $400,000. The funding for the procurement of equipment
will come from the equity investment partners or capital financing
company.
The site development could be initiated by the 10th week, and it would
take approximately 4 weeks to complete. We estimate that the site
development will cost about $30,000. The funding for the site clean up
and development will come from the equity investment partners or
capital financing company.
o Plant construction; renovation and installation: Weeks 23 to 46
The construction of the plant will take about 12 weeks to complete. We
estimate that the plant construction will cost approximately $110,000,
and this funding will be from the equity investment partners or the
capital financing company.
The renovation of the existing facilities should begin by around week
26 and be completed during week 34. We estimate that this portion of
the project will cost about $30,000. The funding for this task will be
from the equity investment partners or the capital financing company.
Once the plant construction is completed, the installation of equipment
will begin. It is expected to take about 10 weeks to complete the
equipment installation. We estimate that it will cost approximately
$100,000. The funding for this task will be from the equity investment
partners or the capital financing company.
o Testing and commissioning; start-up and marketing: Weeks 47 to 54
The testing and commissioning of equipment will begin after the
completion of equipment installation. This task will take about 4 weeks
and cost about $30,000. The funding for this task will be from the
equity investment partners or the capital financing company.
The start-up of the plant will take about 4 weeks from weeks 51 to 54.
It is estimated that the start-up will cost $40,000. The funding for
this task will be from the equity investment partners or the capital
financing company.
10
<PAGE>
We plan to begin developing marketing strategies and initiate a
marketing campaign once the plant construction is complete.
We anticipate that revenues derived from the sale of our products
manufactured in this plant shall come in about ten weeks later.
Liquidity
All of our future revenues are expected to be derived from
sales outside the United States and will be paid in foreign currencies,
principally the Renminbi (China) and, to a lesser extent, in Canadian Dollars.
For purposes of our statement of operations, items are converted into U.S.
dollars at average currency exchange rates prevailing during the period. Assets
and liabilities on our balance sheet are translated into U.S. dollars at
currency exchange rates prevailing at the balance sheet dates. All dollar
amounts stated in this prospectus are in U.S. dollars, unless otherwise
explicitly stated. We have not engaged in hedging activities to reduce our
currency exchange rate exposure.
As to our operations to date, as our financial statements
indicate, we incurred some costs in connection with the outside consultants for
equipment evaluation, development of products and search for joint venture
partners. These costs, including direct labor, overhead and third-party costs
related to establishing our offices in Canada and China amounted to $90,800.
Our monthly operating expenses (exclusive of compensation), which arise
substantially from rent, utilities, and payroll, are approximately $7,500.
Additionally, we have budgeted $30,000 for three trips to China within the next
six months. As at September 30, 2000, we had a balance in our bank account of
approximately $114,500 ($75,000 of which is restricted), and have obtained a
line of credit from our banking institution for $75,000. We believe we have
enough funds on hand to accomplish the remaining objectives of the first stage
of our plan.
We expect to continue incurring net losses for at least one year after
the joint venture plant is in full operation, but we plan to continue to execute
on those measures which are designed to ultimately produce profitable
operations. However, we cannot give any assurances that we will achieve such
objectives.
In general, for the longer term, our business strategy depends
in large part on our ability to establish joint ventures in China. Further
expansion of our business over the long term will require substantial additional
capital and will require additional outside financing. We are reviewing a number
of options from among the following choices: an equity or debt financing, a
partnership with one of the parties which has submitted a letter of intent,
alternative financing similar to the AlphaGen transaction and/or a grant from
the Canadian government. We currently have sufficient funds for the next twelve
months and we will use this time to continue exploring these options, and any
other reasonable proposals, over the next few months.
11
<PAGE>
In summary, while we currently have no customers for our
principal products, we have successfully implemented two of the three parts of
phase one of our business plan by raising sufficient capital to see us through
to phase two and by performing profitable consulting services.
New Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities." ("SFAS No. 133"), which requires companies
to recognize all derivatives as either assets or liabilities in the statement of
financial position and measure those instruments at fair value. Gains and losses
resulting from changes in the fair market values of those derivatives would be
accounted for depending on the use of the derivative and whether it qualifies
for hedge accounting. The effective date of this standard was delayed via the
issuance of SFAS No. 137. The effective date for SFAS No. 133 is now for fiscal
years beginning after June 15, 2000, though earlier adoption is encouraged and
retroactive application is prohibited. We do not presently enter into any
transactions involving derivative financial instruments and, accordingly, do not
anticipate the new standard will have any effect on our financial statements.
Year 2000 Disclosure
We are Year 2000 compliant and we do not anticipate any
internal problems. In the event any internal problems should arise, we have many
expert computer technicians on our payroll and we believe that we will be able
to satisfactorily address any such problems. However, we are dependent on the
integrity of the internet being maintained to derive income from the sale of
advertising spots at remote locations via the internet and if the internet
should fail or if our hosts or internet service providers should fail, we could
be adversely impacted. Given the currently available information this does not
appear to be a likely scenario and, accordingly, we do not believe that our
potential for profitability or operations will be materially affected by the
Year 2000 problem.
Use of Proceeds
We will not receive any proceeds from the sale of the shares
of common stock by the selling stockholders.
12
<PAGE>
Business
Description of business
Avic Technologies is a Delaware corporation established in
March 1999 to capitalize from opportunity available in the building industry in
China and other parts of Asia. We have gathered a team of four experts and
consulting engineers in the building industry, who in aggregate have decades of
years of experience in their specialties. Our team of specialists consist of:
Mr. Alan Chan, a professional engineer with twenty-five years of experience as a
Canadian consulting engineer with Lafarge Consultants Inc., Lavalin Inc., & Cole
Sherman & Associate. He specializes in the fiberglass window frame design &
pultruded window frame manufacturing equipment application. In addition, he had
integrated many fiberglass production lines in North America.
Mr. Silvio Coletti, a Swiss graduate with a degree as a Mechanical Engineer has
sixteen years of experience in the fiberglass material manufacturing business.
He has been in the housing & recreation fiberglass business for the last ten
years and is very knowledgeable in the fiberglass production.
Mr. Victor Sun, a Professional Engineer with over 28 years of engineering and
management experience. Mr. Sun was with Lafarge Cement for 14 years, where he
directed the design of control and automation systems for all new and
rehabilitation projects in North America, South America & Europe. His experience
in developing business with China's cement industry dates back 18 years while
being employed by Lafarge.
Mr. Donald Gennis, a fiberglass application design specialist with fifteen years
experience in fiberglass material design, general contracting & installation.
A study undertaken by the China Building Material Industry,
Planning and Research Institute indicates that the Chinese building industry is
currently undergoing rapid growth. We intend to profit from this growth by
offering our technical expertise in this industry as consultants to small and
medium building contractors, and by establishing joint ventures in the
production and marketing of fiberglass window frames.
Fiberglass window frames are the newest window products for
the building industry in China. Due to their superior quality and competitive
price, and as well as regulations introduced by governments to promote their
use, there exists a substantial growth potential for this product line. Our goal
is to participate in China's rapid economic growth by establishing majority
joint venture interest in selected companies in the fiberglass window industry.
We will introduce these companies to the latest cost-effective technologies and
management skills, adapted to local conditions, thereby improving their overall
competitiveness and profitability.
13
<PAGE>
We plan to evolve business activities through joint ventures
with established Chinese companies. We anticipate that the structure of these
joint ventures will require us to provide management expertise and the use of
advanced pultrusion process machinery and our Chinese partners to contribute
land, production plants, low cost labor and distribution channels for the local
fiberglass windows market.
Fiberglass window frames
Fiberglass is not a new material, it has been in general use
for over 40 years. Its properties are well known. In the case of China, however,
the use of fiberglass for windows is fairly recent.
Pultruded fiberglass has been in use for the window and door
industry for the last 15 years. Fiberglass is a manmade material created by
using glass in fibrous form. Pultrusion is a continuous pulling-type process
used to stretch out and prepare glass fibres for fiberglass frames in
specialized dies.
The performance of fiberglass windows are covered by
international standards that use a rating system to compare one product and/or
material against others. Like wood (e.g. oak, pine, balsa, cedar), fiberglass'
properties can vary, based on chemistry and glass content.
Fiberglass, as a material used for the fabrication of windows
currently meets the 101 Standard established by the American Architectural
Manufacturers Association that defines the products performance under air
leakage, water leakage, wind resistance (strength - blow-out and deflection)
forced entry, and ease of operation. These test reports are readily available,
with summaries given in all the standard literature.
Thermal Performance is measured under the National
Fenestration Rating Council, which defines a window "U" value, solar heat gain
coefficient, and visible light transmission. The performance claims in those
literatures are supported by independent test reports. The US Department of
Energy and National Fenestration Rating Council have been quoted as saying that
"Fiberglass windows are the most energy efficient windows."
Fiberglass is an inert material, corrosive resistant to
materials ranging from salt spray to toxic chemicals. Evidence of fiberglass'
durability, longevity, and corrosion resistance, can be seen by the fact that in
the United States all local gas stations were required to remove their old steel
gas storage tanks and replace them with fiberglass tanks. Fiberglass is accepted
as the material least likely to deteriorate, rot, corrode, etc. and leak the
tanks' contents into the surrounding environment.
14
<PAGE>
The finishing of fiberglass has achieved relatively high
acceptance standards as evidenced by the fact that many U.S. companies are
prepared to warranty black painted windows for sale to hot climate countries as
found in the Middle East. Many offer a full 20 year warranty under conditions of
120 degrees Fahrenheit in the day with extremely high UV and -20 degrees
Fahrenheit at night. This is because fiberglass does not leak, does not retain
heat and has low expansion/contraction co-efficient.
Comparisons with other materials
Some of the basic comparisons of the various materials currently in use for
windows are given in the following table as published by the American Society
for Testing and Materials:
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Unit Fiberglass Plastic Wood Aluminum Steel
Longitudinal Tensile Strength Kg/m2 4200 490 56 1400 2800
Transverse Tensile Strength Kg/m2 700 490 42 1400 2800
Longitudinal Compression Strength Kg/m2 240000 35 105 700 2000
Thermal Coefficient W/m.F 2 1.2 1 810 280
Linear Thermal Expansion Coefficient Mm/mm 7 623 217 100
Corrosion Resistant Good Good Good Medium Bad
Fire Retardancy Good Bad Bad Good Good
Durability Good Bad Medium Good Good
</TABLE>
An important analysis is the environmental comparison of the
various window types. The table below summarizes how the three most common
window frame materials compare in addressing eight major environmental issues.
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Materials Resource Mfg Embodied Energy Used Ozone Emission Disposal
Used Depletion Emissions Energy During Life Depletion During Life
Fiberglass Glass fibre Low Low Med Low Low Med Med
and resin
Aluminum Wood and Med Med Med Med Low Low Med
Clad Wood Aluminum
Vinyl Polyvinyl High High Med Med Low Low Med
Chloride
</TABLE>
15
<PAGE>
Energy use in window production is most likely the most
important environmental factor and this analysis shows that fiberglass windows
have the lowest overall environmental impact. The energy efficiency and long
life of fiberglass windows, significantly reduces the need for purchased energy,
which means that their impacts on resource depletion and embodied energy is also
limited.
In the above tables, our supporting statements are from the following
publications:
- American Society for Testing and Materials
- Engineering Materials Handbook (published by ASM
International)
- Independent Lab Reports (published by Inline Fiberglass Inc.)
- Site Conditions and Application (published by Inline
Fiberglass Inc.)
- Fiberglass Canada Inc. Product Guide
- Fibergrate Inc. Fiberglass Products and Systems
- Dow Chemical Company, Product Guide
- Consumer's Guide, Natural Resources Canada & U.S. Department
of Energy.
The information provided on the characteristics and properties
of fiberglass windows are taken from the U.S. & Canadian Fiberglass Window
vendors' literatures. In addition, some of the claims are also from publications
by the Consumer's Guide, Natural Resources Canada & U.S. Department of Energy.
Following are some noteworthy quotes published regarding
fiberglass frames:
"Fiberglass frames . . . They have the highest R-values of all frames;
thus, they are excellent for insulating and will not warp, shrink, swell, rot or
corrode." U.S. Department Of Energy
"Generally, well-designed fiberglass frames provide the best insulating
value, . . . Fiberglass frames offer insulation and strength in low-profile,
contributing to some of the highest energy ratings." R-2000 Windows. Natural
Resources Canada
"The best energy performance in window frames has been achieved using a
fiberglass frame with foam insulation in the frame cavities." Consumer's Guide.
Natural Resources Canada
16
<PAGE>
Our product
As indicated above, fiberglass provides excellent physical and
mechanical properties desired for window frames. These properties include:
o Low thermal conductivity;
o Dimensional stability over temperature spectrum;
o Resistance to moisture and corrosion;
o Easy acceptance of color finishes;
o High strength;
o Light weight; and
o Fire resistance.
Our basic product will be protruded fiberglass window frames.
Our frames will be made using various formulas with the precise mix of glass and
resin to be determined by engineers working for each joint venture. Each
geographic region will require modifications of this mixture. The determining
factors are mostly local weather conditions and cost of raw materials.
Because of the characteristics of our pultruded fiberglass,
our choice of material is not only attractive for use as a single window framing
material, but also in combination with other materials. These combination
designs allow full utilization of specific advantages of other various
materials, resulting in windows with unique qualities.
The strength and dimensional stability of pultruded fiberglass
also significantly reduces warping when used in tandem with other materials.
Tests have shown that under identical loading conditions, doors with a pultruded
fiberglass core experience about 80% less deflection than a comparable solid
wood door. (Source: Manufacturer's literature)
The main raw materials for making fiberglass windows are
available everywhere in China. The main foreign supplier could be DuPont &
Monsanto, but their unit price will be much higher than the local manufacturers,
since China subjects all polyester materials to substantial import duties and
sale taxes.
Manufacturing
Consultations with our technical experts have determined that,
upon successfully reaching an agreement with a Chinese partner to establish and
operate a manufacturing plant, the following are the major required
characteristics of such factory.
The fiberglass used for our window frame materials are
produced by pultrusion process. Pultrusion is a continuous molding process
17
<PAGE>
utilizing glass or fiberous reinforcement in a polyester or other thermosetting
resin matrices. Pre-selected reinforcement materials like fiberglass roving; mat
or cloth are drawn through a resin bath where all the material is thoroughly
impregnated with a liquid thermosetting resin. The wet-out fiberous laminate is
formed to the desired geometric shape and pulled into the heated steel die. Once
in the die, the resin cure is initiated by controlling precise elevated
temperatures. The laminate solidifies in the exact shape of the cavity of the
die as it is continuously pulled by the machine. The pultrusion process is an
environmentally friendly closed process.
The required energy used to produce a pultruded fiberglass
profile is only about a 1/4 of that for steel and 1/6 of that for aluminum. The
pultruding process ensures stability of dimension, precisely placed fibers and a
smooth, closed surface. Coloring is possible by means of pigments.
For production facilities, we intend to establish an alliance
with a manufacturer that has developed the latest technology in pultrusion
machines. While there are several manufacturers of this type of machinery, our
preference is to reach an arrangement with one of the smaller companies. We
currently are holding two offers. One is from a Canada based company which will
charge us approximately US$200,000 for a machines that can pultrude fiberglass
composites at a speed of two to three times faster than any machines currently
available on the market. This machine is more modular than many of those of the
competition, as it is designed as a series of rigid structural stress relieved
modules, each module being dedicated to a specific task. In the event we do not
have sufficient funding, we can purchase a less sophisticated machine from a
China based company for approximately US$70,000. While the Chinese machine is
not as quick as the Canadian machine, we believe that both machines produce
products of similar quality.
The market
The factual information quoted in this section is from the
study undertaken by the China Building Material Industry, Planning and Research
Institute
With a population of over 1.2 billion and a rapid growth in
its building industry, China has an enormous market for building products,
including of course, door and window frames. In the past ten years, there have
been over 10 billion square meters of completed building construction, consuming
over 1.3 billion square meters of door and window frames. In 1995, 1.2 billion
square meters of residential housing were completed in China, requiring over 180
million square meters of door and window frames.
In 1996, the completed floor area of all types of construction
in China was approximately 1.625 billion square meters, of which about 750
million square meters were for construction in urban areas and about 875 million
square meters for construction in rural areas. For the area completed,
approximately 1.225 billion square meters were for residential purposes.
18
<PAGE>
Based on the current industry norm, about 0.20 square meter of
window would be required for every square meter of building and housing floor
completed. This implies that the total annual consumption of windows in China is
over of 300 million square meters. As the result, China has a huge market for
windows.
Due to the enforcement of the forestry conservation policy in
China, use of wooden windows is prohibited in many areas. The use of steel
windows has been gradually discontinued because of their poor functionality and
poor insulation level. Aluminum windows have also many deficiencies, including
poor insulation, and therefore are not widely used in the Northern and coastal
areas in China. Plastic steel windows, the latest generation of window product
after aluminum, have the characteristics of good appearance, good insulation,
corrosion-resistance and vapor and waterproof. They are currently widely used
and have become the main window product in China.
Fiberglass windows have been recently introduced in China.
They are the latest generation of windows in China. In comparison to plastic
steel windows, fiberglass windows are stronger, have a lower expansion
co-efficient, are more heat resistant, and are easier to clean. Fiberglass
windows also do not require steel reinforcement like plastic steel window and
their cost is competitive to that of plastic/steel windows. In 1998, we
commissioned a business feasibility study, and the following expectations are
derived from that report. We expect that the use of fiberglass windows will grow
rapidly in the future in China as China introduces increasingly stringent energy
conservation regulations. In fact, China recently introduced guidelines by the
Chinese government that set a target to reduce energy consumption of housing by
up to 50% within the next few years.
In rural areas, wooden windows are still used. However, with
the economic development and the increase in wealth among farmers, and with the
enforcement of forestry conservation policy, many rural areas have begun to use
more modern windows, such as plastic/steel and fiberglass windows.
Besides requiring over 300 million square meters of windows
for new construction in China, there is also a growing demand for windows in the
renovation market, as more and more consumers want to renovate their homes. It
is estimated that the total window market for both new constructions and
renovations in China is over 500 million square meters. This means the demand
for window frame materials, which include wood, steel, aluminum, plastic and
fiberglass, is about 5 million tonnes annually. To meet this demand would
require 1,000 factories with an average annual production output of 5,000
tonnes. The current annual production capacity of plastic window frames in China
is less than 300,000 tonnes. For fiberglass, the capacity is less than 50,000
tonnes. The central Chinese government has issued several directives demanding
the abolition, by year 2000, of the use of wood, steel, and aluminum as window
frame materials, while recommending the use of plastic and fiberglass materials.
19
<PAGE>
An announcement from the Chinese government some time in the next couple of
months is anticipated that this directive is to become effective immediately.
With the intended abolition of the wood, steel, and aluminum window, there
exists a substantial growth potential for plastic and fiberglass windows. We
believe that with their superior quality and competitive pricing, fiberglass
windows will replace plastic windows in the future as the main window product in
China.
Marketing and distribution
In pursuing its business strategy in China, we will initially target
the major urban centers, such as Beijing, Shanghai, Shenzhen and Nanning.
Currently, all these centers are experiencing massive building programs in both
commercial and residential sectors. Furthermore, these large centers are the
most developed and open to the adaptation of new technology or products. More
and more people in these centers are joining the middle class ranks and starting
to buy their own homes. Many of these middle income people are demanding and
accepting products of higher quality. We believe these large urban centers will
be the highest potential and acceptance for fiberglass window and door products.
We intend to market our products through our own joint venture
marketing forces as well as through agents and state owned building materials
retail companies. Initially, we will focus our marketing efforts in those major
urban centers with strong housing construction activities.
Distribution will be by railway and truck transportation. All
large urban centers in China have a good network of rail and road systems.
Competition
Fiberglass window frames are a new building material for China
and there is currently little competition. The industry is in its initial
development stage and thus has a very short history. The fiberglass window frame
industry uses mostly domestic equipment and therefore, the quality of their
products is not very high. A few plants import foreign pulling equipment, but do
not have access to the latest technology. Thus their production is not
promising. There are two currently existing fiberglass window production plants
in China.
o Yao Hua Yin Lai Fiber Glass Door and Window LTD.
Yao Hua Yin Lai Fiber Glass Door and Window LTD. is located in
the city of Qin Huang Dao, Hebei Province. This company imported Canadian
equipment and technology. It started to build its plant in March, 1999, and
plant is expected to be completed and to be in operation by late spring 2000.
The needed imported equipment is on the way and is expected to arrive in China
around April, 2000. Total investment for this project is 29,920,000.00 RMB
20
<PAGE>
(approximately 3,605,000 US dollars). Annual production capacity of this plant
is 100,000 m2 of fiber glass. The floor space for the plant is 4000 m2 . The
investment also involved in building a small community in the surrounding plant
area with school & living quarters.
This plant is an equity joint venture between Chinese and
foreign companies. The Chinese investors own 75% of the interests in the joint
venture and the foreign party, a Canadian company, has 25% of the interests. The
two parties purchased all equipment together and they imported two pultrusion
machine production lines, 50 molds, a door and window assembly line and a
painting line.
This plant is the first plant of its kind in China that has
imported a complete set of Canadian equipment and technology. However, it is not
in operation yet. We cannot, as yet, tell their performance on the market. Our
research shows that the market for their products is fairly promising.
o Beijing Fang Shan Fiber Glass Plant.
Beijing Fang Shan Fiber Glass Plant is a cooperative company.
It has almost 200 employees and covers about 4 acres of land. The main product
of this plant is fiberglass water tanks. However, Beijing Fang Shan Fiber Glass
Plant has been planning to build a production facility for fiberglass doors and
windows since June, 1998. This plant invested 2,000,000.00 RMB (about 241,000 US
dollars) and bought 4 domestic pultrusion machines, equipment and molds. Its
annual production capacity is 70,000 m2 of fiberglass. After more than one year
in construction & installation, the plant was officially put into operation in
late1999. Beijing Dai Xing Jin Yuan Xiao Qu used 10,000 m2 of its fiberglass.
Users of their products have generally had good comments on their output.
Government regulation
Since this industry is involved with innovative building
material products and high technology manufacturing, all levels of the Chinese
government are encouraging its development. The central government also
introduced regulation to promote its use, therefore, any additional government
regulation is not expected to be a hindrance.
Furthermore, the industry is creating many new jobs for the
local economies, therefore, in some Chinese cities, there are many local tax
incentives available to attract these types of businesses into the city. Under
Chinese income tax regulations, a 33% income tax rate is normally applicable to
a Sino-foreign joint venture. A typical Sino-foreign joint venture of a
production nature is exempt from Chinese income tax for its first two profitable
years, and receive a 50% reduction in income taxes for the third to fifth years.
Any business in China is subjected to Chinese law and
regulation. From our past working experience in China, the attractiveness of a
joint venture with a Chinese partner is that most of approval process will be
the responsibility of the prospective Chinese Partner.
21
<PAGE>
Most of the research and development work is being carried out
in Canada currently. In the future, the joint venture Chinese partners will be
involved in the in-depth marketing research.
The product improvement or the manufacturing process might be
done in China, but those activities are still three to five years away.
Management
Officers and directors
Our officers and directors are as follows:
Name Age Position
Ms. Annette Shaw 47 President, Chief Executive Officer,
Director
Victor Sun 57 Director
Robert E. Cenon 41 Vice President
Ms. Annette Shaw, Director, CEO, and President
Ms. Shaw, one of our founders, has worked both in the private
and public sectors, and has held various management positions. In 1990, she
established the groundwork for this company by forming her own business to
develop and finance projects in the Far East. From 1992 to 1997 she worked for
the Planned Parenthood Ass. of San Mateo County as manager of claims processing,
while still developing her Far East interests. She has established strong and
close relationships with many contacts in both the private and government
sectors in China and Taiwan. This extensive experience and entrepreneurial
spirit is the basis for our development and potential implementation of joint
ventures and strategic partnerships. From 1997 to early 1999, she was the
Chairman and CEO of Sino-Canadian Resources Ltd., a non-reporting Bulletin Board
company seeking to develop gold mining in China. Ms. Shaw has a B.A. in Business
Administration from University of Windsor, Ontario, Canada in 1979.
Mr. Victor Sun, Director
Victor Sun is one of our co-founders and is a Professional Engineer with over 28
years of engineering and management experience. Mr. Sun was with Lafarge Cement
for 14 years, from August 1971 to September 1986, where he directed the design
of control and automation systems for all new and rehabilitation projects. In
the late 1970's, he initiated the cement consulting market in China for Lafarge
Consultants with the Fa Yuan project and established a co-operative relationship
with a major cement design and research institute in China. He worked for
Monenco Agra from Sept 1987 to August 1997 as the instrumentation discipline
22
<PAGE>
engineer of the Hibernia Off Shore Platform Project. From 1996 to 1999, he
served as Vice President of Asia Pacific Concrete Inc. (Calgary exchange: symbol
AFI), of Calgary, Alberta, a business involved in development with Chinese
partners of cement and concrete projects in China. His experience in developing
business with China's cement industry dates back 18 years while being employed
by Lafarge. Since helping establish the China Pacific Industrial Corporation
(CPIC), a private investment company with holdings in Canada and China, he has
continued to establish relations with contacts in China and has been
instrumental in developing CPIC's potential joint venture projects.
Mr. Robert E. Cenon, Vice-President
Mr. Cenon has a degree in business communications from the University of East
Manila, Philippines. He began his career as a credit analyst for the State
Compensation Insurance Fund, in its San Francisco office in 1987, where he still
maintains a full time position. He experienced and worked in all major aspects
of the insurance, investment and finance world over the past thirteen years. His
last three years have focused on performing the duties of an Associate
Information System Analyst for the State Compensation Insurance Fund, where his
duty involved technical support on all activities to computer database, on-line
products and Internet/Intranet website. He has developed and used many contacts
and relationships with investors and brings this important and valuable resource
to us.
Indemnification of directors and officers
Our By-Laws includes certain provisions permitted by the
Delaware General Corporation Act whereby our officers and directors are to be
indemnified to the maximum extent permitted by law. These provisions of the
By-Laws have no effect on any director's liability under Federal securities laws
or the availability of equitable remedies, for breach of fiduciary duty. We
believe that these provisions will facilitate our ability to continue to attract
and retain qualified individuals to serve as our directors and officers.
At present, there is no pending litigation or proceeding
involving any of our directors, officers, employee or agents where
indemnification might be required or permitted. We are unaware of any threatened
litigation or proceedings that might result in a claim for such indemnification.
Compensation of directors
Directors do not receive any compensation for their service as
members of the board of directors.
23
<PAGE>
Security ownership of certain
beneficial owners and management
The following table sets forth, as of September 30, 2000, information
regarding the beneficial ownership of our common stock based upon the most
recent information available to us for
o each person known by us to own beneficially more
than five (5%) percent of our outstanding common
stock,
o each of our officers and directors and
o all of our officers and directors as a group.
Each stockholder's address is c/o Avic Technologies Ltd., 445
St-Francis Xavier St., Montreal, Quebec H4X 2C9. Our telephone number is (514)
844-3510.
<TABLE>
<S> <C> <C> <C>
Number of
Shares Owned Current Post-Offering
Name Beneficially % of Total % of Total
Annette Shaw 4,700,000 38.46 34.36
Victor Sun 1,020,000 8.35 4.91
Robert E. Cenon 40,000 0.33 0.08
All directors and Officers
as a Group(3 persons) 5,760,000 47.13 39.35
</TABLE>
Executive compensation
From inception through the fiscal year ended December 31, 1999, no
compensation was paid to any of our executive officers.
On June 30, 2000, we issued to Annette Shaw and Victor Sun, 200,000,
and 400,000 common shares, respectively, in lieu of salaries owed for the period
January 1, 2000 to June 30, 2000.
During the three months ended September 30, 2000, we recorded $30,000
of compensation expense arising from services provided by Annette Shaw and
Victor Sun; such amount is included in accrued and other liabilities as of
September 30, 2000.
24
<PAGE>
Certain relationships and related transactions
We lease office space and secretarial support from an entity owned by
Mr. Louis Ladouceur, one of our minority shareholders, under a lease agreement
requiring monthly payments of $3,500 through March 31, 2001. Total rent paid
under this agreement during the period March 4, 1999 to September 30, 2000 was
$63,000.
On December 2, 1999, we issued 320,000 shares of common stock
to Asia Internet Inc. as consideration for web design services at a rate of $.10
per share. The web site will keep our investors informed on the progress of this
project, disseminate information about the company's products and services, and
serve as a general tool for communication. The entity is majority owned by Ms.
W.C. Shih who was not a shareholder of the Company at that time. Mr. Sun, one of
our directors, owns less than 10% of this entity and is neither an officer or a
director of this entity. The services were valued at $32,000, which we believe
is a fair price for such services.
On December 2, 1999, we issued 288,000 shares of common stock
to A. Chan & Associates Inc., a less than 5% shareholder of the Company, as
consideration for equipment appraisal services at a rate of $.10 per share. The
services were valued at $28,800, which we believe is a fair price for such
services.
On December 2, 2000, we issued 235,000 shares of common stock to an
entity owned by one of our founding stockholders as consideration for consulting
services related to our search for a joint venture partner in China. The
services were valued at $23,500, which we believe is a fair price for such
services.
During the period March 4, 1999 (date of incorporation) to June 30,
2000, we paid $38,500 for consulting services to BDV International, a
corporation owned by a family member of Mr. Sun, one of our directors and
stockholders. We believe this was a fair price for such services.
In connection with a Regulation S offering, we paid consulting fees of
approximately $36,000 to a company partially owned by a spouse of Mr. Sun, one
of our directors and stockholders.
On June 30, 2000, we issued to Annette Shaw and Victor Sun, 200,000 and
400,000 shares, respectively in lieu of salaries owed for the period January 1,
2000 to June 30, 2000.
We incurred consulting fees of $14,640 from two of our stockholders,
one of whom is also a director, during the three months ended September 30,
2000.
Disclosure of commission position on
indemnification for securities act liabilities
Our By-Laws require us to indemnify any and all persons who
may serve or who have served at any time as directors or officers as well as
employees or agents, or who, at the request of the board of directors, may
serve, or at any time have served as directors, officers, employees or agents of
another corporation. Indemnification is required to the full extent permitted by
the General Corporation Law of Delaware as it may from time to time be amended.
Our By-Laws also require indemnification in the event of a
derivative claim of persons who were our officers, directors, employees or
agents or of another enterprise if the person was serving at the request of the
board of directors as an employee or agent of that enterprise. Indemnification
is also permitted as provided under Delaware law except in cases of gross
negligence or willful misconduct.
25
<PAGE>
We may purchase and maintain insurance for the benefit of any
person as provided in our By-Laws and to the extent permitted by Delaware law.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons pursuant to the foregoing provisions, or otherwise, we have been advised
that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore unenforceable.
Description of securities
Authorized and outstanding stock
Our authorized capital stock consists of 50,000,000 shares of Common
Stock, $.0001 par value. As of September 30, 2000, there were 12,221,000 shares
of Common Stock outstanding, which were held by approximately 57 stockholders of
record.
Common stock
Subject to legal and contractual restrictions on payment of
dividends, the holders of our common stock are entitled to receive such lawful
dividends as may be declared by the Board of Directors. In the event of our
liquidation, dissolution or winding up, the holders of shares of common stock
are entitled to receive all of our remaining assets available for distribution
to stockholders after satisfaction of all liabilities and preferences. Holders
of our common stock do not have any preemptive, conversion or redemption rights
and there are no sinking fund provisions applicable to our common stock. Record
holders of our common stock are entitled to vote at all meetings of stockholders
and at those meetings are entitled to cast one vote for each share of record
that they own on all matters on which stockholders may vote. Stockholders do not
have cumulative voting rights in the election of our directors. As a result, the
holders of a plurality of the outstanding shares can elect all of our directors,
and the holders of the remaining shares are not able to elect any of our
directors. All outstanding shares of common stock are fully paid and
non-assessable, and all shares of common stock to be offered and sold in this
offering will be fully paid and non-assessable.
Transfer agent and registrar
The stock transfer agent and registrar for our common stock is
Intercontinental Registry and Stock Transfer, located at 900 Buchanan Blvd # 1,
Boulder City, Nevada 89005-2100. The transfer agent charges $15 to issue a stock
certificate. This means that in the event you want to sell your shares, there
26
<PAGE>
will be an additional $15 fee on top of your other transactional costs. This fee
is fairly standard and is usually, although not always, absorbed by the broker
In the event your broker does not pick up this fee, it will reduce your net
profits from any sale.
Dividend policy
Under applicable law, dividends may only be paid out of
legally available funds as proscribed by a statute, subject to the discretion of
the board of directors. In addition, it is currently our policy to retain
internally generated funds to support future expansion of our business.
Accordingly, even if we do generate earnings, and even if we are not prohibited
from paying dividends, we do not currently intend to declare or pay cash
dividends on our common stock for the foreseeable future.
Shares available for future sale
On the date of this Prospectus, all 7,411,000 shares included
in this Prospectus will generally be freely tradable without restriction imposed
by, or further registration under, the Securities Act. An additional 4,810,000
shares of our common stock may be deemed "restricted securities," as that term
is defined under Rule 144 promulgated under the Securities Act. Such shares may
be sold to the public, subject to volume restrictions, as described below.
Commencing at various dates, these shares may be sold to the public without any
volume limitations.
In general, under Rule 144 as currently in effect, subject to
the satisfaction of certain other conditions, a person, including one of our
affiliates, or persons whose shares are aggregated with affiliates, who has
owned restricted shares of common stock beneficially for at least one year is
entitled to sell, within any three-month period, a number of shares that does
not exceed 1% of the total number of outstanding shares of the same class. In
the event our shares are sold on an exchange or are reported on the automated
quotation system of a registered securities association, you could sell during
any three-month period the greater of such 1% amount or the average weekly
trading volume as reported for the four calendar weeks preceding the date on
which notice of your sale is filed with the SEC. Sales under Rule 144 are also
subject to certain manner of sale provisions, notice requirements and the
availability of current public information about us. A person who has not been
one of our affiliates for at least the three months immediately preceding the
sale and who has beneficially owned shares of common stock for at least two
years is entitled to sell such shares under Rule 144 without regard to any of
the limitations described above.
You should note that we anticipate that our shares of common
stock will initially be included for quotation on the OTC Bulletin Board.
Pursuant to SEC regulations, the OTC Bulletin Board is not considered an
"automated quotation system of a registered securities association" and Rule 144
will only permit sales of up to 1% of the outstanding shares during any three
month period.
27
<PAGE>
Plan of distribution
The sale of the shares of common stock by the selling
stockholders may be effected by them from time to time in the over the counter
market or in such other public forum where our shares are publicly traded or
listed for quotation. These sales may be made in negotiated transactions through
the timing of options on the shares, or through a combination of such methods of
sale, at fixed prices, which may be charged at market prices prevailing at the
time of sale, at prices related to such prevailing market prices or at
negotiated prices. The selling stockholders may effect such transactions by
selling the shares through broker-dealers, and such broker-dealers may receive
compensation in the form of discounts, concessions or commissions from the
selling stockholders and/or the purchasers of the shares for which such
broker-dealer may act as agent. The compensation as to a particular
broker-dealer may be in excess of customary compensation. Broker-dealers may not
act as a principle in the sale of any of the shares sold through this
prospectus.
The selling stockholders and any broker-dealers who act in
connection with the sale of the shares hereunder may be deemed to be
underwriters within the meaning of Section 2(11) of the Securities Act, and any
commissions received by them might be deemed to be underwriting discounts and
commissions under the Securities Act.
Selling stockholders
We are registering
o shares of common stock purchased by investors in our
1999 private placement offerings, and
o a portion of the shares of common stock owned by our
founders.
Other than the costs of preparing this prospectus and a
registration fee to the SEC, we are not paying any costs relating to the sales
by the selling stockholders. Each of the selling stockholders, or their
transferees, and intermediaries to whom such securities may be sold may be
deemed to be an "underwriter" of the common stock offered hereby, as that term
is defined under the Securities Act. Each of the selling stockholders, or their
transferees, may sell these shares from time to time for his own account in the
open market at the prices prevailing therein, or in individually negotiated
transactions at such prices as may be agreed upon. The net proceeds from the
sale of these shares by the selling stockholders will inure entirely to their
benefit and not to that of us.
Except as indicated in the footnotes to the table below, none
of the selling stockholders, including the principals of any entities, has held
any position or office, or had any material relationship with us or any of our
predecessors or affiliates within the last three years, and after completion of
28
<PAGE>
this offering will own the amount of our outstanding common stock listed
opposite their name. The shares reflected by each selling stockholder is based
upon information provided to us by our transfer agent and from other available
sources in December 1999.
These shares may be offered for sale from time to time in
regular brokerage transactions in the over-the-counter market, or, either
directly or through brokers or dealers, or in private sales or negotiated
transactions, or otherwise, at prices related to the then prevailing market
prices. Thus, they may be required to deliver a current prospectus in connection
with the offer or sale of their shares. In the absence of a current prospectus,
if required, these shares may not be sold publicly without restriction unless
held by a non-affiliate for two years, or after one year subject to volume
limitations and satisfaction of other conditions. The selling stockholders are
hereby advised that Regulation M of the General Rules and Regulations
promulgated under the Securities Exchange Act of 1934 will be applicable to
their sales of these shares. These rules contain various prohibitions against
trading by persons interested in a distribution and against so-called
"stabilization" activities.
The selling stockholders, or their transferees, might be
deemed to be "underwriters" within the meaning of Section 2(11) of the Act and
any profit on the resale of these shares as principal might be deemed to be
underwriting discounts and commissions under the Act. Any sale of these shares
by selling shareholders, or their transferees, through broker-dealers may cause
the broker-dealers to be considered as participating in a distribution and
subject to Regulation M promulgated under the Securities Exchange Act of 1934,
as amended. If any such transaction were a "distribution" for purposes of
Regulation M, then such broker-dealers might be required to cease making a
market in our equity securities for either two or nine trading days prior to,
and until the completion of, such activity.
<TABLE>
<S> <C> <C> <C>
Shares Beneficially Owned
Before Offering After Offering
Name of Selling Security Holder Offering
-------------------------------------------------------
Annette Shaw (1) 4,700,000 500,000 4,200,000
Robert E. Cenon (2) 40,000 30,000 10,000
Victor I. H. Sun (3) 1,020,000 420,000 600,000
Alan Chan (4) 500,000 500,000 0
C.P. Lee 250,000 250,000 0
Janet Lee 250,000 250,000 0
Ed Tam 125,000 125,000 0
Gerry Peacock 75,000 75,000 0
Norman Kwong 250,000 250,000 0
Bradly Kwong 250,000 250,000 0
Dennis Nikirk 200,000 200,000 0
Francis Leong 250,000 250,000 0
Louis H. Ladouceur 250,000 250,000 0
</TABLE>
29
<PAGE>
<TABLE>
<S> <C> <C> <C>
Mei Yueh Chou 475,000 475,000 0
David Amsel 150,000 150,000 0
Yik Ching Sun 250,000 250,000 0
Hong Gang 240,000 240,000 0
1688 Investissement Inc. (5) 330,000 330,000 0
Brian Riordan 10,000 10,000 0
Yaohua Wang 15,000 15,000 0
Easter Kwong 10,000 10,000 0
Kenneth Wong 10,000 10,000 0
Lily Tu 10,000 10,000 0
Chang Yu Shao 100,000 100,000 0
Solomon Bierbrier 34,000 34,000 0
Zaven Darakjian 20,000 20,000 0
324966 Alberta Ltd. 35,000 35,000 0
Walter Wlasenko 10,000 10,000 0
Jia Ming Liu 20,000 20,000 0
Charles S.M. Mak 20,000 20,000 0
Asia Internet Inc. (6) 320,000 320,000 0
Michael L. Pang 10,000 10,000 0
Claude Filion 50,000 50,000 0
Dr. Mauice Houde 50,000 50,000 0
Cielo D. Cenon 10,000 10,000 0
Gordon Ching 20,000 20,000 0
Samson Lau 10,000 10,000 0
George Ching 10,000 10,000 0
Elisa Ching 10,000 10,000 0
Stephen T. Minamide 10,000 10,000 0
Alan Riendeau 12,000 12,000 0
A. Chan & Associates 288,000 288,000 0
Kit Chan 20,000 20,000 0
Stephanie Ho Lem 5,000 5,000 0
Winnie Shih 210,000 210,000 0
Dynamic Concept Investment Ltd. 235,000 235,000 0
Olivia De Santos 10,000 10,000 0
TTY Systems Inc. (7) 300,000 300,000 0
Douglas C. Tom 10,000 10,000 0
Andre Labranche 10,000 10,000 0
Maryse Leblond 20,000 20,000 0
Sun Consultant Inc. (8) 180,000 180,000 0
Yik Yiu Sun (9) 225,000 225,000 0
Patricia Medina 124,000 124,000 0
Ron Guttman 25,000 25,000 0
Chou Chin Lung 148,000 148,000 0
TOTALS: 12,221,000 7,411,000
</TABLE>
30
<PAGE>
(1) One of our officers and directors.
(2) One of our officers.
(3) One of our directors.
(4) One of our consultants and owner of A. Chan & Associates.
(5) Owned 48% by Mr. Sun's spouse.
(6) Owned 8% by Mr. Sun.
(7) Owned by Mr. Sun's brother.
(8) Owned by Mr. Sun.
(9) Mr. Sun's sister.
Legal matters
Certain legal matters in connection with this offering are
being passed upon by the law firm of Heller, Horowitz & Feit, P.C., New York,
New York.
Available information
Commencing on the date of this prospectus, we will be subject
to the information requirements of the Securities Exchange Act of 1934, as
amended. This Act requires us to file reports, proxy statements and other
information with the Securities and Exchange Commission. Copies of the reports,
proxy statements and other information we file can be inspected at the
Headquarters Office of the Securities and Exchange Commission located at 450
Fifth Street, N.W., Room 1024, Washington, D.C. 20549 and at certain of its
regional offices at the following addresses:
<PAGE>
o 7 World Trade Center, 13th Floor, New York, New York 10048; and
o 500 West Madison Street, Suite 1400, Chicago, Illinois 60661.
Copies of the material we file may be obtained from the Public
Reference Section of the Commission, at 450 Fifth Street, N.W., Room 1024,
Washington, D.C. at prescribed rates. The Public Reference Room can be reached
at (202) 942-8090. The Commission also maintains a web site that contains
reports, proxy and information statements and other information regarding us.
This material can be found at http://www.sec.gov.
31
<PAGE>
AVIC TECHNOLOGIES LTD.
(A Development Stage Enterprise)
TABLE OF CONTENTS
--------------------------------------------------------------------------------
<TABLE>
<S> <C>
Pages
Financial Statements:
Balance Sheets as of September 30, 2000 (Unaudited)
and December 31, 1999 F-1
Statements of Operations for the three months ended September 30,
2000 and 1999, the nine months ended September 30, 1999 and the
periods March 4, 1999 (date of incorporation) to September 30, 1999
and 2000 (Unaudited)
F-2
Statement of Stockholders' Equity for the nine months ended
September 30, 2000 (Unaudited) F-3
Statements of Cash Flows for the three months ended September 30,
2000 and 1999, the nine months ended September 30, 1999 and the
periods March 4, 1999 (date of incorporation) to September 30, 1999
and 2000 (Unaudited) F-4
Notes to Financial Statements F-5
</TABLE>
<PAGE>
AVIC TECHNOLOGIES LTD.
(A Development Stage Enterprise)
BALANCE SHEETS AS OF
<TABLE>
<S> <C> <C>
------------------------------------------------------------------------------------------------------------------------------------
September 30,
2000 December 31,
(Unaudited) 1999
------------------ -------------------
ASSETS
Cash and cash equivalents (including restricted cash
of $75,000) $ 114,534 $ 109,900
Accounts receivable 11,256 -
Note receivable - 15,000
------------------ -------------------
TOTAL $ 125,790 $ 124,900
================== ===================
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Notes payable to stockholders $ 20,146 -
Advances from stockholders 2,500 $ 2,500
Accrued and other liabilities 44,640 -
------------------ -------------------
Total liabilities 67,286 2,500
------------------ -------------------
STOCKHOLDERS' EQUITY:
Common stock - $.0001 par value; 50,000,000 shares
authorized; 12,221,000 and 11,621,000 shares
issued and outstanding 1,222 1,162
Additional paid-in capital 376,489 316,549
Subscription receivable - (2,980)
Deficit accumulated during the development stage (319,207) (192,331)
------------------ -------------------
Total stockholders' equity 58,504 122,400
------------------ -------------------
TOTAL $ 125,790 $ 124,900
================== ===================
--------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements.
F-1
<PAGE>
AVIC TECHNOLOGIES LTD.
(A Development Stage Enterprise)
UNAUDITED STATEMENTS OF OPERATIONS
FOR THE
<TABLE>
<S> <C> <C> <C> <C> <C>
Period March 4, Period March
Three Three Months Nine 1999 4, 1999
Months Ended Ended Months Ended (date of (date of
September 30, September 30, September 30, incorporation) to incorporation)
2000 1999 2000 September 30, 1999 to September 30,
2000
--------------- ---------------- --------------- ------------------- -----------------
--------------- ---------------- --------------- ------------------- -----------------
EXPENSES (substantially all related party):
Compensation $ 30,000 - $ 90,000 $ - $ 90,000
Consulting fees 16,640 32,250 19,845 64,000 83,845
Professional fees 9,650 9,202 14,105 38,002 62,157
Website design - - - - 32,000
Rent 10,500 10,500 31,500 21,000 63,000
Other 122 6,248 7,532 11,523 24,311
--------------- ---------------- --------------- ----------------- ------------------
Total expenses 66,912 58,200 162,982 134,525 355,313
--------------- ---------------- --------------- ----------------- ------------------
REVENUES:
Consulting 33,246 - 33,246 - 33,246
Interest 1,000 - 2,860 - 2,860
---------------
--------------- --------------- --------------- ------------------ -----------------
Total revenues 34,246 - 36,106 - 36,106
--------------- --------------- --------------- ------------------ -----------------
NET LOSS $(32,666) $ (58,200) $(126,876) $ (134,525) $ (319,207)
=============== ================ =============== ================== =================
NET LOSS PER SHARE
Basic and diluted $ (0.00) $ (0.01) $ (0.01) $ (0.02) $ (0.03)
=============== ================ =============== ================== =================
Weighted average number
of shares - basic and diluted 12,221,000 10,257,000 11,824,700 9,075,300 10,746,600
=============== ================ =============== ================== =================
</TABLE>
See notes to financial statements.
F-2
<PAGE>
AVIC TECHNOLOGIES LTD.
(A Development Stage Enterprise)
UNAUDITED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000
<TABLE>
<S> <C> <C> <C> <C>
------------------------------------------------------------------------------------------------------------------------------------
Deficit
Accumulated
Additional During the
Common Stock Paid-In Subscription Development
Shares Value Capital Receivable Stage Total
-------------- ----------- -------------- ---------------- --------------- ----------
Balances, December 31, 1999 11,621,000 $1,162 $316,549 $ (2,980) $(192,331) $ 122,400
Issuance of common stock in
exchange for services rendered 600,000 60 59,940 60,000
Collection of subscription
receivable 2,980 2,980
Net loss for the nine months
ended September 30, 2000 (126,876) (126,876)
-------------- ----------- -------------- ---------------- --------------- ----------
Balances, September 30, 2000 12,221,000 $1,222 $ 376,489 $ 0 $(319,207) $ 58,504
============== =========== ============== ================ =============== ==========
</TABLE>
See notes to financial statements.
F-3
<PAGE>
AVIC TECHNOLOGIES LTD.
(A Development Stage Enterprise)
UNAUDITED STATEMENTS OF CASH FLOWS
FOR THE
<TABLE>
<S> <C> <C> <C> <C> <C>
Period March 4, Period March
Three Three Months Nine 1999 4, 1999
Months Ended Ended Months Ended (date of (date of
September 30, September September incorporation) incorporation)
2000 30, 1999 30, 2000 to September to September
30, 1999 30, 2000
---------------- -------------- -------------- ----------------- ---------------
---------------- -------------- -------------- ----------------- ---------------
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net loss $ (32,666) $ (58,200) $ (126,876) $ (134,525) $ (319,207)
Adjustments to reconcile net loss to
net cash provided by (used in) operating
activities:
Increase in accounts receivable (11,256) - (11,256) - (11,256)
Increase (decrease) in accrued and
other liabilities 44,640 (17,302) 44,640 59,023 44,640
Non-cash compensation - - 60,000 144,300
---------------- -------------- -------------- ----------------- ---------------
---------------- -------------- -------------- ----------------- ---------------
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES 718 (75,502) (33,492) (75,502) (141,523)
---------------- -------------- -------------- ----------------- ---------------
---------------- -------------- -------------- ----------------- ---------------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Loan made - - - - (25,000)
Repayment of loan - - 15,000 - 25,000
---------------- -------------- -------------- ----------------- ---------------
---------------- -------------- -------------- ----------------- ---------------
NET CASH PROVIDED BY
INVESTING ACTIVITIES - - 15,000 - -
---------------- -------------- -------------- ----------------- ---------------
---------------- -------------- -------------- ----------------- ---------------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Advances/loans from stockholders 20,146 - 20,146 - 22,646
Cash received from stock subscription 2,980 - 2,980 - 2,980
Cash paid for stock issuance costs - (41,064) - (41,064) (45,189)
Proceeds from the issuance of
common stock - 169,700 - 245,900 275,620
---------------- -------------- -------------- ----------------- ---------------
---------------- -------------- -------------- ----------------- ---------------
NET CASH PROVIDED BY FINANCING
ACTIVITIES 23,126 128,636 23,126 204,836 256,057
---------------- -------------- -------------- ----------------- ---------------
---------------- -------------- -------------- ----------------- ---------------
NET INCREASE IN CASH AND CASH
EQUIVALENTS 23,844 53,134 3,634 129,334 114,534
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD 90,690 76,200 109,900 - -
---------------- -------------- -------------- ----------------- ---------------
---------------- -------------- -------------- ----------------- ---------------
CASH AND CASH EQUIVALENTS,
END OF PERIOD $ 114,534 $ 129,334 $ 114,534 $ 129,334 $ 114,534
================ ============== ============== ================= ===============
================ ============== ============== ================= ===============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION -
Interest and taxes paid $ 0 $ 0 $ 0 $ 0 $ 0
================ ============== ============== ================= ===============
================ ============== ============== ================= ===============
</TABLE>
See notes to financial statements.
F-4
<PAGE>
AVIC TECHNOLOGIES LTD.
(A Development Stage Enterprise)
UNAUDITED NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
NOTE A - FORMATION AND OPERATIONS OF THE COMPANY
Avic Technologies Ltd., Inc. (the "Company") was incorporated under the laws of
the state of Delaware on March 4, 1999. The Company, which is considered to be
in the development stage as defined in Financial Accounting Standards Board
Statement No. 7, intends to participate in the building industry in China and
other parts of Asia by offering consulting services to contractors, and by
establishing joint ventures for the production and marketing of fiberglass
window frames. The planned principal operations of the Company have not
commenced; therefore accounting policies and procedures have not yet been
established.
Basis of Presentation
The accompanying unaudited financial statements of the Company have been
prepared in accordance with generally accepted accounting principles for interim
financial information and the instructions to Form 10-QSB and Rule 10-01 of
Regulation S-X of the Securities and Exchange Commission ("SEC"). Accordingly,
the financial statements may not include all of the information and footnotes
required by generally accepted accounting principles. In the opinion of
management, all adjustments (consisting of normal recurring adjustments)
considered necessary for a fair presentation have been included. Operating
results for the three and nine-month periods ended September 30, 2000 are not
necessarily indicative of the results that may be expected for the year ended
December 31, 2000. The accompanying financial statements and notes thereto
should be read in conjunction with the Company's audited financial statements as
of December 31, 1999.
Use of Estimates
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosures of
contingent assets and liabilities at the date of the financial statements. The
reported amounts of revenues and expenses during the reporting period may be
affected by the estimates and assumptions management is required to make. Actual
results could differ significantly from those estimates.
NOTE B - GOING CONCERN
The accompanying financial statements have been prepared on a going concern
basis, which contemplates the realization of assets and the satisfaction of
liabilities in the normal course of business. The Company has incurred a net
loss of approximately $289,200 for the period March 4, 1999 (date of
incorporation) to September 30, 2000, anticipates incurring losses for the
foreseeable future and will require a significant amount of capital to commence
its planned principal operations and proceed with its business plan.
Accordingly, the Company's ability to continue as a going concern is dependent
upon its ability to secure an adequate amount of capital to finance its
operations and implement its business plan.
F-5
<PAGE>
The Company anticipates that it will be able to secure adequate debt financing
to enable it to commence its operations and proceed with its business plan,
however there is no assurance that they will be successful in these efforts. In
the event the Company is unable to secure the requisite financing to implement
its business plan, the Company will seek alternative funding sources, and may
have to defer and/or adjust its focus and expenditures currently required to
implement such business plan. These factors among others may indicate that the
Company will be unable to continue as a going concern for a reasonable period of
time. The financial statements do not include any adjustments relating to the
recoverability and classification of recorded asset amounts or the amounts and
classification of liabilities that might be necessary should the Company be
unable to continue as a going concern.
NOTE C - CONCENTRATION OF CREDIT RISK
The Company maintains substantially all of its cash and cash equivalents at one
Canadian insured institution, which has a maximum insurance limit of $60,000.
Accordingly, at September 30, 2000, the Company's uninsured cash balances
approximated $54,500.
NOTE D - INCOME TAXES
During the period March 4, 1999 (date of incorporation) to September 30, 2000,
the Company recognized losses for both financial and tax reporting purposes.
Accordingly, no deferred taxes have been provided for in the accompanying
statement of operations.
At September 30, 2000, the Company had a net operating loss carryforward of
approximately $226,800 for income tax purposes. The carryforward will be
available to offset future taxable income through the period ended September 30,
2020. The deferred income tax asset arising from this net operating loss
carryforward is not recorded in the accompanying balance sheet because the
Company established a valuation allowance to fully reserve such asset as its
realization did not meet the required asset recognition standard established by
SFAS 109.
NOTE E - NET LOSS PER SHARE
The Company computes net loss per share in accordance with SFAS No. 128
"Earnings per Share" ("SFAS No. 128") and SEC Staff Accounting Bulletin No. 98
("SAB 98"). Under the provisions of SFAS No. 128 and SAB 98, basic net loss per
share is computed by dividing the net loss available to common stockholders for
the period by the weighted average number of common shares outstanding during
the period. Diluted net loss per share is computed by dividing the net loss for
the period by the number of common and common equivalent shares outstanding
during the period. There were no common equivalent shares outstanding during any
of the periods included the accompanying statements of operations.
F-6
<PAGE>
NOTE F - PROPOSED COMMON STOCK OFFERING
The Company intends to file a registration statement, which will enable various
shareholders to sell 7,411,000 shares of the common stock they own in the
Company (the Company will not receive any part of the proceeds from the sale of
any of these shares). The Company has agreed to pay all expenses associated with
the registration of the shares and the printing of the prospectus. Management
anticipates that the ultimate total expense paid for the selling stockholders
under this arrangement will approximate $59,000.
NOTE G - RELATED PARTY TRANSACTIONS (ALSO SEE NOTE F)
During the three months ended September 30, 2000, the Company borrowed
approximately $20,000 from two of its shareholders. The notes, which accrue
interest at the rate of 12% per annum, are unsecured and mature on December 31,
2000. Another shareholder of the Company has personally guaranteed these notes.
The Company issued 200,000 shares of its common stock to its Chief Executive
Officer and 400,000 shares of its common stock to one of its Directors as
compensation for services performed on behalf of the Company during the six
months ended June 30, 2000. The fair market value assigned to these shares was
based on e latest sales of the Company's stock at $0.10 per share. No amounts
were ascribed to services provided by the Company's officers prior to January 1,
2000 as the Company engaged and directed consultants to perform the majority of
the services required to operate the Company; accordingly management believes
that the value of services provided by its officers was not significant during
the period March 4, 1999 (date of incorporation) to December 31, 1999.
The Company leases its office space and secretarial support from an entity owned
by one of its shareholders under a lease agreement, which requires monthly
payments of $3,500 through March 31, 2001. Total rent paid under this agreement
is reflected as rent expense in each of the periods included in the accompanying
statements of operations.
During the period March 4, 1999 (date of incorporation) to December 31, 1999,
the Company issued 843,000 shares of its common stock as consideration for the
following services, which were provided by entities in which various
stockholders have ownership interests:
<TABLE>
<S> <C> <C> <C> <C>
Value of Price per Date
Description of Service Service share Shares Issued Issued
---------------------- -------- ------ ------------- ------
Website Design $32,000 $0.10 320,000 12/2/99
Equipment Appraisal 28,800 $0.10 288,000 12/2/99
Search for Joint Venture Partners 23,500 $0.10 235,000 12/2/99
-------- -------
Totals $84,300 843,000
======= =======
</TABLE>
The value of these services, which was based on the number, and fair value, of
shares issued (share prices represent the price at which other shares were being
sold at the date the services were rendered), has been included in various
expenses in the accompanying statement of operations.
F-7
<PAGE>
During the period March 4, 1999 (date of incorporation) to December 31, 1999,
the Company paid $38,500 for certain consulting services to an entity owned by a
family member of one of the Company's directors and stockholders. Such amount
has been included in Consulting Fees in the accompanying statement of
operations.
In connection with a Regulation S offering, the Company paid fees of
approximately $36,000 to a company partially owned by a spouse of one of the
Company's directors and stockholders. Because the costs related to the sale of
the Company's stock, they have been reflected as a reduction of stockholders'
equity in the accompanying financial statements.
The Company incurred consulting fees of $14,640 from two of the Company's
shareholders (one of who is a Director) during the three months ended September
30, 2000; such amount is included in accrued and other liabilities as of
September 30, 2000.
NOTE H - LETTER OF INTENT
The Company has entered a letter of intent with a Chinese company to establish a
joint venture for the purpose of producing fiberglass window and doorframes.
Pursuant to terms of the letter of intent, the Company has agreed to fund
approximately $506,000 (or 60%) of the total anticipated investment cost. Of
this amount, approximately $217,000 is expected to be funded through a loan that
the Company has agreed to arrange on the joint venture's behalf. The joint
venture is anticipated to have a life of 20 years, and both of the venturers'
have agreed to shoulder the risks jointly.
NOTE I - LINE OF CREDIT
At September 30, 2000, the Company has a $75,000 line of credit with a bank.
Advances under the line, which matures on January 8, 2001, accrue interest at
prime plus 1.5% (the interest rate was 12% at September 30, 2000) and are
secured by a certificate deposit of $75,000 held at such bank (such amount has
been reflected as restricted in the accompanying balance sheet). In addition,
the line has been unconditionally guaranteed by one of the Company's directors
and shareholders. At September 30, 2000, no advances were outstanding;
accordingly as of such date, the Company had available borrowings of $75,000
under the line.
F-8
<PAGE>
<TABLE>
<S> <C>
You should only rely on the information
contained in this document or other
information that we refer you to. We
have not authorized anyone to provide you
with any other information that is different. You
should note that even though you received a copy of 7,411,000 Shares of Common Stock
this Prospectus, there may have been changes in our
affairs since the date of this Prospectus. This
Prospectus does not constitute an offer to sell
securities in any jurisdiction in which such offer
or solicitation is not authorized
AVIC TECHNOLOGIES LTD.
</TABLE>
TABLE OF CONTENTS PAGE
Risk Factors 2
Special Note Regarding PROSPECTUS
Forward-Looking Statements 7
Summary Historical Financial
Information 8
Plan of Operations 9
Use of Proceeds 12
Business 13
Management
20
Security Ownership of Certain
Beneficial Owners and Management 22
Executive Compensation 22
Certain Relationships and
Related Transactions 23
Disclosure of Commission Position
on Indemnification for Securities
Act Liability 23
Description of Securities 23
Plan of Distribution 25
Selling Stockholders 26
Legal Matters 28
Available Information 29
Index to Financial Statements.............. F-
_____________ , 2000
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution
The following statement sets forth the estimated expenses in
connection with the offering described in the Registration Statement, all of
which will be borne by the Registrant.
Securities and Exchange Commission Fee........... $ 196
Accountants' Fees................................ $ 12,000
Legal Fees....................................... $ 20,000
Company's Administrative Expenses................ $ 20,000
Printing and engraving........................... $ 5,000
Miscellaneous.................................... $ 2,804
TOTAL $ 60,000
Item 14. Indemnification of Directors and Officers.
Our By-Laws includes certain provisions permitted pursuant by
the Delaware General Corporation Act whereby our officers and directors are to
be indemnified against certain liabilities. These provisions of the By-Laws have
no effect on any director's liability under Federal securities laws or the
availability of equitable remedies, for breach of fiduciary duty. We believe
that these provisions will facilitate our ability to continue to attract and
retain qualified individuals to serve as our directors and officers.
At present, there is no pending litigation or proceeding
involving any of our directors, officers, employee or agents where
indemnification might be required or permitted. We are unaware of any threatened
litigation or proceeding that might result in a claim for such indemnification.
The Registrant may also purchase and maintain insurance for
the benefit of any director or officer which may cover claims for which the
Registrant could not indemnify such persons.
Item 15. Recent Sales of Unregistered Securities
In March 1999, Registrant sold an aggregate of 8,000,000
shares at par value to 16 purchasers. All of shares were restricted and were
issued pursuant to the exemptions from registration contained in Regulation S
(for sales outside the United States to 13 non-U.S. persons) and Regulation D,
Rule 506 (for sales to 3 accredited investors).
<PAGE>
Between May 1, 1999 and December 31, 1999, Registrant sold
2,778,000 common shares, at a price of $0.10 per share for aggregate gross
proceeds of $277,800, to 55 investors (including 13 existing shareholders who
purchased more stock). All of the shares were restricted and were issued
pursuant to the exemptions from registration contained in Regulation S (for
sales outside the United States to 51 non-U.S. persons) and Regulation D, Rule
506 (for sales to 4 sophisticated investors, previously known to the Registrant
and whom the Registrant knows to have experience in evaluating and investing in
private companies).
During December 1999, Registrant issued an aggregate of
843,000 shares to 3 entities as payment for services. The shares were valued at
$.10 per share and were issued pursuant to the exemption contained in Regulation
S to non-US entities.
On June 1, 2000, Registrant issued 400,000 and 200,000 shares
of its common stock to its CEO and one of its directors, respectively, in lieu
of salary. The shares were valued at $.10 per share and were issued pursuant to
the exemption contained in Regulation D, Rule 506, as both recipients are
accredited investors.
Item 16. Exhibits and Financial Statements Schedules.
3.1 Certificate of Incorporation*
3.2 By-Laws*
4.1 Specimen Common Stock Certificate*
5 Opinion of Heller, Horowitz & Feit, P.C.
10.1 Lease Agreement*
10.2 Consulting Agreement with A. Chan & Associates, Inc.*
10.3 Letter of intent with Proneq Inc.*
10.4 Letter of intent with Pronitec Investments Ltd.*
10.5 Letter of intent with Topmost Universal Co. Ltd.*
10.6 Letter of intent with Huacheng Nav&Com Corp.*
23.1 Consent of Heller, Horowitz & Feit, P.C.
(included in the Opinion filed as Exhibit 5)
23.2 Consent of Kingery, Crouse & Hohl, P.A.
27 Financial Data Schedule
----------------------------
* Previously filed
Item 17. Undertakings.
------------
<PAGE>
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which it offers or sells
securities, a post-effective amendment to this registration statement to:
(i) Include any prospectus required by section 10(a)(3) of the
Securities Act;
(ii) Reflect in the prospectus any facts or events which, individually
or together, represent a fundamental change in the information in the
registration statement; and notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any deviation
from the low or high and of the estimated maximum offering range may be
reflected in the form of prospectus filed with Commission pursuant to Rule
424(b) if, in the aggregate, the changes in volume and price represent no more
than a 20% change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective registration statement.
(iii) Include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement provided,
however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the
registration statement is on Form S-3, Form S-8 or Form F-3, and the information
required to be included in post-effective amendment by those paragraphs is
contained in periodic reports filed with or furnished to the Commission by the
registrant pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934 that are incorporated by reference in the registration statement.
(iv) Include any additional or changed material information on the plan
of distribution.
(2) For determining liability under the Securities Act, treat
each post-effective amendment as a new registration statement of the securities
offered and the offering of the securities at that time to be the initial bona
fide offering.
(3) File a post-effective amendment to remove from
registration any of the securities that remain unsold at the end of the
offering.
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act,
the registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements of filing on Form SB-2 and has authorized this
registration statement or amendment to be signed on its behalf by the
undersigned, in the City of Montreal on the 31st day of December 2000.
AVIC TECHNOLOGIES LTD.
By:/s/Annette Shaw
Annette Shaw, President and CEO
In accordance with the requirements of the Securities Act,
this registration statement or amendment was signed by the following persons in
the capacities and on the dates stated:
Signature Title Date
/s/Annette Shaw
Ms. Annette Shaw President, Chief December 31, 2000
Executive Officer
and Director
/s/Victor I. Sun
Victor I. Sun Director December 31, 2000
